Ethereum is cratering amid claims of a $50 million hack

The value of digital currency Ethereum is spiralling downwards amid an apparent huge hack targeting an organisation with huge holdings of the currency.

It’s now below $15 – down from more than $21 just hours ago. Community members fear that as much as $50 milion of the digital currency has been stolen.

The core Ethereum codebase does not appear to be compromised.

What’s going on? Ethereum is a decentralised currency, like bitcoin – but it’s built in such a way that it also allows for decentralised organisations to be built on top of its blockchain (the public ledger of transactions), and smart contracts that can execute themselves automatically if certain conditions are met.

One of these organisations is the DAO – the Decentralised Autonomous Organisation, that controls tens of millions of dollars-worth of the digital currency. The DAO is currently sitting on 9.2 million ether, according to its web page, worth $134 million.

Early Friday morning, it appears to have been hit with a devastating exploit, with as-yet unidentified attackers draining appearing to drain millions of ether – with a theoretical value in the tens of millions of dollars.

One Ether wallet being shared by community members as a recipient of the apparently stolen funds currently holds almost 3.4 million Ether. At a current exchange rate of around $14/1ETH, that works out at a staggering $47 million.

However, the price is almost certain to continue to fall as the United States wakes up and news of the hack spreads. Community members are also working to see if it can be recovered in some way, although it’s not clear whether this effort will be succesful.

“The person has their ETH locked in a Child DAO, so they will not be able to get the ETH out for a long time,” community organiser Griff Green said in the DAO’s dedicated Slack discussion channel. “The entire Ethereum Ecosystem is collaborating on a solution.”

DAO members are currently trying to work on a technical fix to prevent the ongoing removal of ether from DAO. But the decentralised nature of the the organisation means there’s no central authority that can simply flip the switch and make changes.

Here’s what the apparent theft has done to the price of ether over the last few hours:

The news comes after a recent boom for Ethereum (as well as sister digital currency bitcoin). It only recently passed $20/1ETH, in a first for the network.

The apparent exploit used by the attackers was documented earlier this month. “Your smart contract is probably vulnerable to being emptied if you keep track of any sort of user balances and were not very, very careful,” Peter Vessenes wrote in a blog post on June 9. It looks like we’re now seeing this in action.